Active ownership matters now more than ever amid coronavirus crisis
BY Yaelle Gang | May 14, 2020
At a time of uncertainty caused by the coronavirus crisis, active ownership is more important than ever, says Kevin Thomas, chief executive officer of the Shareholder Association for Research and Education.
Many organizations are trying to influence companies and policy-makers, and those voices matter, he notes. “You don’t want to be sitting on the sidelines.”
Shareholders play an important role in being engaged on solutions and ideas for how to move forward out of the current situation. “Shareholders have a very important voice and if they’re not using it then other people are speaking for them.”
Thomas’ advice for pension plan sponsors is to get in the game. “There are no sidelines. We have to be taking part in the dialogue with the companies we own and with policy-makers if we want to see this recovery come together in the right way and see the companies that we own act responsibly.”
The current crisis is highlighting the fact that workers really matter. While the idea of human capital management as a core responsibility for companies isn’t new, the situation at hand is making it obvious that boards can’t ignore frontline workers, he adds. “One thing that is coming out of this is the idea that workers matter and that systemic risks also matter. It’s not just what happens within your company, but how your company operates within the economy as a whole.”
Longer-term issues such as climate change can also play a part in current engagement efforts related to recovery after the coronavirus crisis, says Thomas. “I think the voice of Canadian pension plans is important on this to say a recovery has to be a green recovery and we have to look to the kinds of supports and bailouts that actually point to a more sustainable economy in the long run. We shouldn’t just be trying to return to normal, but also try to make sure that we’re building for a better future.”
Another longstanding issue that’s coming to the forefront at this time is executive compensation. “What this crisis does is put that into a much starker context than we’ve ever seen. If workers are being laid off and having their own incomes hurt and the governments have to step in to support worker incomes, this is not a time to have oversized executive pay packages on the table.”
Some executives and boards are responding thoughtfully and taking pay cuts at least for the short term, says Thomas, noting the current situation is a chance for companies to revisit their approach to executive compensation in the first place.
“And I especially see that in light of the people that are going out on a limb now, the workers of essential services, to deliver services to us all that we require without having to have a massive bonus attached to that. They’re doing it because it’s the right thing to do and they care about their work and they care about Canadians.
“I don’t think the executives are any different. I just think we treat them like they are and we shouldn’t.”